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2024 Supreme(Online)(GUJ) 22883
HIGH COURT OF GUJARAT
MS. JUSTICE VAIBHAVI D. NANAVATI, J
M/S. NORTON INDUSTRIES THROUGH PRAVINBHAI M BANE – Appellant
Versus
PUNJAB NATIONAL BANK THROUGH AUTHORISED OFFICER – Respondent
R/SPECIAL CIVIL APPLICATION NO. 7718 of 2024
MR DASHRATH CHAUHAN, MR JAYESH S GUJARATI, MR NITISH M NAIR, MR LALIT M PATEL, VIJAY H PATEL
The right of redemption under the SARFAESI Act ceases once a sale certificate is issued, and failure to challenge timely extinguishes such rights.
Headnote:(A) SARFAESI Act, 2002 - Sections 13(2), 13(4), 13(8), and 14 - Borrower defaulting on loan repayment - Notice issued under Section 13(2) was claimed not to be served - Sale of secured property conducted after 7 years of default - Right of redemption extinguished post-sale certificate issuance - Both Debt Recovery Tribunal and Appellate Tribunal upheld legality of actions taken by the bank. (Paras 3, 8, 9, 10, 11, 12, 16)
(B) Legal Principles - The right of redemption ceases once a sale certificate is issued under the SARFAESI Act - The borrower must challenge actions taken under the Act within stipulated timeframes to maintain rights. (Paras 9, 10)
Facts of the case:
The petitioner, a borrower, defaulted on a cash credit facility leading to classification as NPA. The bank issued a demand notice under Section 13(2) which the petitioner claimed was not served. After 7 years, the bank sold the secured property and issued a sale certificate. (Paras 2, 2.1, 2.3)
Findings of Court:
The court found that the notice was duly served and the bank followed proper procedures under the SARFAESI Act. The right of redemption was extinguished after the sale certificate was issued. (Paras 10, 11, 12)
Issues: Whether the notice under Section 13(2) was served and whether the petitioner retained the right to redeem the property post-sale. (Paras 8, 9)
Ratio Decidendi: The court ruled that the borrower’s failure to challenge the bank’s actions in a timely manner led to the extinguishment of the right of redemption, affirming the legality of the bank's actions under the SARFAESI Act. (Paras 10, 11)
Result: Petition dismissed.
ORAL JUDGMENT
1. Heard Mr. Dashrath Chauhan, the learned advocate appearing for the petitioner, Mr. Lalit M. Patel, the learned advocate appearing for the respondent No.1 and Mr. Vijay H.Patel, the learned advocate appearing for the respondent No.2.
2. The petitioner herein is a borrower. The respondent No.1 having sanctioned the cash credit facility to the petitioner for an amount of Rs.3,00,000/- in the year 1997. Upon execution of the security documents the respondent Bank disbursed the said credit facility. The petitioner herein made the payment regularly to the respondent Bank but after sometime due to loss in business and unavoidable circumstances the petitioner was not in position to make payment regularly to the respondent Bank. In view thereof, the respondent No.1 classified the account of the petitioner as Non Performing Assets (NPA) on 30.3.2003.
2.1 Notice under Section 13(2) of the SARFAESI Act came to be issued by the respondent No.1 to the petitioner on 20.11.2003 demanding outstanding amount of Rs.4,06,242.96.
2.2 It is the case of the petitioner that the said notice was never served to the petitioner. After a period of 07 years the respondent No.1 issued possession notice on 5.8.2010 and thereby took the symbolic possession of the property of the petitioner.
2.3 The respondent No.1 Bank published sale notice on 12.9.2011 and put the property for sale and having sold the property for an amount to the tune of Rs.26,51,000/- issued the sale certificate on 9.11.2011 in favour of the respondent No.2 herein.
2.4 The respondent Bank filed an application under Section 14 of the Act for taking physical possession of the property in question. The order came to be passed granting the said application by the learned CMM, Ahmedabad on 30.3.2013. The petitioner thereafter filed Securitization Application No.39 of 2013 before the Debt Recovery Tribunal, Ahmedabad against the respondent No.1 Bank from taking physical / actual possession of the property in question and from any action under or pursuant to the impugned sale notice dated 20.11.2023 and from taking any further steps under Section 13(4) of the Securitization Act with respect to the property in question.
2.5 Upon hearing the respective parties the Debt Recovery Tribunal, Ahmedabad, by order dated 17.9.2013 dismissed the S.A. No.39 of 2013. It was directed to refund the residual amount to the petitioner from the sale proceeds of the secured property. The said order is duly produced at Annexure-A.
2.6 Being aggrieved and dissatisfied by the order passed by the Debt Recovery Tribunal, Ahmedabad by dated 17.9.2013 in the S.A. No.39 of 2013 the petitioner preferred appeal being Appeal No.264 of 2013 before the Debt Recovery Appellate Tribunal, Mumbai which also came to be dismissed on 16.1.2024. The said order is duly produced at Annexure-B.
3. Being aggrieved and dissatisfied by the order passed by the Debt Recovery Appellate Tribunal, Mumbai in Appeal No.264 of 2013 dated 16.1.2024 dismissing the Appeal the petitioner has approached this Court seeking the following reliefs :-
“(A) YOUR LORDSHIPS MAY BE PLEASED to admit and allow this Petition;
(B) YOUR LORDSHIPS MAY BE PLEASED to issue writ of mandamus or any other appropriate writ, order or direction by quashing and setting aside the impugned order passed by the Hon'ble Presiding Officer, DRT-I Ahmedabad in the Securitization Application No. 39 of 2013 dated: 17/9/2013 and further be pleased to quash and set aside the order passed by the Chairman, The Debt Recovery Appellate Tribunal at Mumbai in Appeal NO. 264/2013 dated : 16/1/2024 to confirm the order passed by DRT-I, Ahmedabad order dt : 17/9/2013 at Annexure -A and Annexure -B respectively to this petition;
(C) YOUR LORDSHIPS MAY BE PLEASED to quash and set aside the notice dated 20/11/2003 under section 13(2) of the Securitization Act and declared this notice void ab initio; and to declare the subsequent all proceeding of respondent no.1 bank after notice dated 20/11/2003
